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2025 (2) TMI 475 - SC - VAT / Sales TaxRevision of assessments of the assessee-respondent made for the assessment years 2002-2003 to 2004-2005 - refund the exempted portion of the tax as per the provision of Package Scheme of Incentives 1993 on the sale of goods effected in the course of inter-State trade or commerce - HELD THAT - The State Government though continues to have the power in public interest to grant exemption/partial exemption of tax on inter- State sale trade or commerce but the same is subject to fulfilment of the requirements laid down under Sub-Section (4) of Section 8 of the CST Act which means that henceforth the exemption so granted would be admissible only if Form C and D are supplied by the dealer in context with the aforesaid interstate sale trade and commerce. The absolute power initially conferred under Section 8(5) upon the State Government to grant exemption/partial exemption of tax in connection with inter-State sale trade or commerce with the amendment was circumscribed and restricted to the fulfilment of the requirement of Section 8(4) of the CST Act which prescribes for the submission of Form C and D only w.e.f. 11.05.2002. However such restrictions are prospective in nature and would not apply retrospectively to cases where absolute exemption was permitted much prior to the amendment. In the instant case the assessee-respondent was granted tax benefits under the PSI 1993 issued in exercise of power under Section 8(5) of the CST Act as per the eligibility and entitlement certificates dated 20.02.1998 and 24.03.1998 respectively and that said benefit was available to the assessee-respondent up to the period of 2012 or to the extent of Rs.273.54 crore whichever was earlier. The said benefit granted to the assessee-respondent was not with any restriction much less the condition of submission of Form C and D . Thus on the basis of such exemption granted by the petitioner vide Eligibility Certificate dated 20.02.1998 and Entitlement Certificate dated 24.03.1998 a substantive right had accrued to the respondent to claim the said benefit up to the year 2012 or to the extent of Rs.273.54 crore - in view of the amendment of Section 8(5) by the Finance Act 2002 the State Government ceases to have power to grant exemption in respect of sale of goods covered under Section 8(2) but that is not the issue herein. The precise issue in the present case is whether the aforesaid amendment would take away the right which had accrued to the assessee-respondent under the Eligibility/Entitlement certificates wherein absolute exemptions were granted without any condition of submission of Form C and D . In the case at hand the assessee-respondent was held eligible for absolute exemption under the PSI 1993 issued in exercise of power under Section 8(5) of the CST Act as per Eligibility certificate dated 20.02.1998 and Entitlement certificate dated 24.03.1998 granting exemption to it from payment of tax under the BST Act and CST Act to the extent of Rs. 273.54 crore or up till 2012 whichever is earlier. The said exemption granted to the assessee-respondent was much prior to the enforcement of the Finance Act 2002 with effect from 11.05.2002. Therefore by virtue of the unamended Section 8(5) and the Notification issued thereunder as well as under the aforesaid Eligibility and Entitlement certificates a substantive right of exemption from payment of tax had accrued to the assessee-respondent - The requirement for fulfilling the condition of Section 8(4) of the CST Act for getting the benefit of tax exemption came subsequently after the amendment of Section 8(5) with effect from 11.05.2002 and would apply prospectively to transactions in respect of which eligibility and entitlement certificates are issued subsequently. Conclusion - The State Government was not competent to issue the impugned notices for revising the assessment of the assessee-respondent and to demand the exempted tax only for the reason that the assessee-respondent has not submitted Form C and D in support of inter-State sale trade commerce. The requirement of submission of Form C and D would apply prospectively after 11.05.2002 i.e. after the Finance Act of 2002. The appeal lacks merit and hence dismissed.
1. ISSUES PRESENTED and CONSIDERED
The primary issue for consideration was whether the tax exemption granted to the assessee-respondent under the Package Scheme of Incentives 1993 (PSI 1993), pursuant to Section 8(5) of the Central Sales Tax Act (CST Act), could be withdrawn following the amendment of Section 8(5) by the Finance Act, 2002. This amendment required compliance with Section 8(4) of the CST Act, which mandates the submission of declarations in Form 'C' or 'D'. Additionally, the court considered whether the amendment could be applied retrospectively to negate benefits that had already accrued to the assessee-respondent prior to the amendment. 2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents: Section 8(1) and 8(2) of the CST Act outlined the tax rates applicable to inter-State sales. Section 8(4) mandated that sales under Section 8(1) be supported by declarations in Form 'C' or 'D'. Section 8(5) allowed State Governments to grant tax exemptions or reductions in public interest, overriding Sections 8(1) and 8(4). The amendment to Section 8(5) in 2002 required compliance with Section 8(4) for exemptions. The court referenced the case of Shree Digvijay Cement Co. Ltd. vs. State of Rajasthan, which established that prior to the amendment, the State could dispense with the requirement of Forms 'C' and 'D' for exemptions. Court's Interpretation and Reasoning: The Court interpreted the amendment to Section 8(5) as prospective, meaning it did not retroactively affect rights that had already accrued under the previous legal framework. The Court emphasized that the amendment did not explicitly state that it would nullify previously granted exemptions or alter existing rights. The Court relied on the principle that statutes are generally prospective unless clearly stated otherwise. Key Evidence and Findings: The assessee-respondent had been granted tax exemptions under PSI 1993, evidenced by Eligibility and Entitlement Certificates issued in 1998, allowing exemptions up to a specified amount or until 2012, whichever came first. These certificates were issued without the condition of submitting Forms 'C' and 'D'. Application of Law to Facts: The Court applied the principle that substantive rights accrued under the unamended Section 8(5) could not be retroactively nullified by the 2002 amendment. The Court found that the assessee-respondent had a vested right to the tax exemption as per the certificates issued before the amendment, and the State Government's attempt to impose new conditions retroactively was unjustified. Treatment of Competing Arguments: The State argued that the amendment required compliance with Section 8(4) for ongoing exemptions. The Court rejected this, noting that the amendment was prospective and did not affect rights that had already accrued. The Court cited precedents emphasizing the protection of vested rights and the prospective nature of legislative changes unless explicitly stated otherwise. Conclusions: The Court concluded that the State Government could not retroactively apply the 2002 amendment to negate the exemptions granted to the assessee-respondent under PSI 1993. The requirement for Forms 'C' and 'D' applied only to transactions post-amendment. 3. SIGNIFICANT HOLDINGS The Court held that the amendment to Section 8(5) of the CST Act was prospective and did not affect previously accrued rights. It emphasized that substantive rights, once granted, could not be unilaterally revoked without due process. The Court quoted, "every statute, it is said, which takes away or impairs vested rights acquired under existing laws... must be presumed to be intended not to have a retrospective effect." The Court established that the State Government's attempt to revise assessments based on the new requirement of Forms 'C' and 'D' was invalid for transactions covered by pre-existing certificates. It reaffirmed that the amendment did not retroactively impose new conditions on past exemptions. The final determination was that the appeal lacked merit, and the State Government's notices for revising the assessments were quashed. The Court dismissed the appeal, maintaining the validity of the exemptions granted under PSI 1993 prior to the amendment.
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